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• Supplement | HBS Case Collection | 2013 (Revised from original 2012 version)

  V-Cola: Confidential Instructions for Price Down

  Ian Larkin

  This is information for one of the six roles to be used in the V-Cola negotiation exercise. Please see V-Cola General Instructions (912043) and Teaching note (912042) for full information.

  Citation:

  Larkin, Ian. "V-Cola: Confidential Instructions for Price Down." Harvard Business School Supplement 912-049, April 2013. (Revised from original March 2012 version.)

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• Article | Journal of Labor Economics | Forthcoming

  The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales

  Ian Larkin

  This paper investigates the pricing distortions that arise from the use of a common non-linear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor's accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters where they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6-8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.

  Keywords: incentives; motivation; compensation; gaming; sales force management;

  Citation:

  Larkin, Ian. "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales." Journal of Labor Economics (forthcoming).

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• Working Paper | HBS Working Paper Series | 2013

  The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales

  Ian I. Larkin

  This paper investigates the pricing distortions that arise from the use of a common non-linear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor's accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters where they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6-8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.

  Citation:

  Larkin, Ian I. "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales." Harvard Business School Working Paper, No. 13–073, February 2013. (Journal of Labor Economics, Forthcoming.)

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